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When Do Firms Adjust Prices? Evidence from Micro Panel Data

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Abstract

This paper analyzes the price setting behavior of firms using data from a large panel of quarterly firm surveys from 1984 to 2006. These data allow to track changes in firms’ prices, their price expectations and several other firm-specific developments such as changes in costs for input products and capacity utilization rates. The analysis shows that state dependent pricing is clearly important and that variables measuring the current situation of the firm add a lot to the explanatory power of a price adjustment probability model, compared to purely time dependent features. Although the rate of inflation is a significant explanatory variable, the inclusion of macroeconomic variables adds only marginally to the explanatory power of the model with the firm specific variables. Furthermore, when taking into account sticky plan models by excluding possibly predetermined price changes, the importance of state dependent factors becomes even larger. The data also display features that suggest that sticky information plays a role for price setting.

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Bibliographic Info

Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 07-160.

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Length: 38 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:kof:wpskof:07-160

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Keywords: Price setting behavior; time dependent pricing; state dependent pricing; sticky prices; sticky plans; sticky information;

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Citations

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Cited by:
  1. Heiner Mikosch, 2012. "Sticky Prices, Competition and the Phillips Curve," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 11-294, KOF Swiss Economic Institute, ETH Zurich.
  2. Boriss Siliverstovs, 2010. "Assessing Predictive Content of the KOF Barometer in Real Time," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 10-249, KOF Swiss Economic Institute, ETH Zurich.
  3. Eva M. Köberl & Sarah M. Lein, 2011. "The NIRCU and the Phillips curve: an approach based on micro data," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 44(2), pages 673-694, May.
  4. Bo E. Honoré & Daniel Kaufmann & Sarah Lein, 2012. "Asymmetries in Price‐Setting Behavior: New Microeconometric Evidence from Switzerland," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 44, pages 211-236, December.
  5. Simone Elmer & Thomas Maag, 2009. "The Persistence of Inflation in Switzerland: Evidence from Disaggregate Data," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 09-235, KOF Swiss Economic Institute, ETH Zurich.
  6. Daniel Kaufmann, 2008. "Price-Setting Behaviour in Switzerland Evidence from CPI Micro Data," Working Papers 2008-15, Swiss National Bank.
  7. Andrea Lassmann, 2013. "Exchange Rate Transmission and Export Activity at the Firm Level," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 13-331, KOF Swiss Economic Institute, ETH Zurich.
  8. Sarah M. Lein & Eva Köberl, 2009. "Capacity Utilisation, Constraints and Price Adjustments under the Microscope," KOF Working papers, KOF Swiss Economic Institute, ETH Zurich 09-239, KOF Swiss Economic Institute, ETH Zurich.
  9. Carstensen, Kai & Schenkelberg, Heike, 2011. "Time- or State-Dependence? An Analysis of Inflation Dynamics using German Business Survey Data," Discussion Papers in Economics, University of Munich, Department of Economics 12170, University of Munich, Department of Economics.
  10. Heiner Mikosch, 2013. "Der Zusammenhang zwischen Preisen, Kapazitätsauslastung und Wettbewerb," KOF Analysen, KOF Swiss Economic Institute, ETH Zurich, KOF Swiss Economic Institute, ETH Zurich, vol. 7(1), pages 91-103, March.
  11. Bachmann, Rüdiger & Born, Benjamin & Elstner, Steffen & Grimme, Christian, 2013. "Time-varying business volatility, price setting, and the real effects of monetary policy," Working Papers 01/2013, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
  12. Schenkelberg, Heike, 2011. "Why are Prices Sticky? Evidence from Business Survey Data," Discussion Papers in Economics, University of Munich, Department of Economics 12158, University of Munich, Department of Economics.
  13. Eva Koeberl, 2009. "Die Inflationsneutrale Kapazitätsauslastung und die Phillips-Kurve in der Schweiz – Eine Analyse mit Mikrodaten," KOF Analysen, KOF Swiss Economic Institute, ETH Zurich, KOF Swiss Economic Institute, ETH Zurich, vol. 3(1), pages 67-78, March.

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